Today, Blake Yarborough talks to us about portfolio or blanket loans. These cover more than 1 loan and can provide simplicity for payments.
Blanket loans can be easier to manage and give flexibility when you have multiple loans you’re having to keep track of.
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investment industry teach quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Blake: Hello, this is Blake Yarborough with Capital Concepts. Today I’m the host for the REI Classroom. Today I want to tell you something that’s dear to me. It’s what I call the comfort loan for investors. It’s the blanket loans.
Mike: This show is sponsored by PassiveRental.com.
Blake: The blanket loans are simply a portfolio loan with a local bank that covers more than one property. It blankets the properties. What I really like about it compared to conventional lending when you’re in the first 10 properties, there are real stringent rules what you can and can’t do, like you can’t do cash-outs past four. You’ve got certain limitations on when you can do things. But with the blanket loan, like I said, it’s a bank’s portfolio. If it makes sense to them, we can do it.
For instance it gives you flexibility. If you want to keep it as a long term rental, as long as the bank is aware that may be a possibility, usually they’re good with it. It just depends on the bank.
The other thing I like about it is the economies of scale. Let’s say you go to refi a house, it might cost you $4000-5000 every time you refi a property.
With a blanket loan, let’s say you do four houses together, instead of costing you 16 to $20,000, it will cost you that initial $4000 to $5000. But after that, the fixed cost associated with closing the house is already paid so all you have at that point is your loan origination fee, which I’m a little partial to since I’ve got a mortgage company. And then also your title insurance because you’re getting an insurance policy on a bigger amount. So on four properties you might be $19,000 in closing costs versus 16 to 20. That’s one of the things I mean about economies of scale.
Currently I have about 130 rental units. I have roughly 90 houses. Another reason why I like portfolio loans or blanket loans like this where we roll a bunch of houses into one note, is simplicity of payments. I don’t have to make 90 different payments every month.
When we had a bunch of individual payments sometimes one thing didn’t get pushed, a button didn’t get pushed to Wells Fargo or something on the online bill pay and then all of a sudden we’re getting called a couple of weeks later scrambling around not wondering where we’re going to get our credit. With a blanket loan you have many times less number of payments, so it’s easier to manage.
With the exit strategy as I mentioned earlier, since it’s a portfolio loan and we can rent, just brings me to talking about one of the reasons why I like houses so much, there’s a certain liquidity with houses. So if you ever get into a financial bind, with like a multifamily, in that business it starts getting tight.
Some aggressive person or shark is going to come in there and beat you up on price and you’re going to lose money. But with a house you can sell it or keep it rented, you can own or finance. You can take advantage of any of those with the portfolio loan and that’s one of the reasons I think the flexibilities of exit strategy are important.
Those are just a few of the reasons why I call it the comfort loan for investors because the flexibility it has, economies of scale, simplicity of payments, and ultimately the different options you have as far as cash outs and other options.
So please give us a call and check us out another day at REI Classroom. Thanks.
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